VeChain: Supply Chain Meets Blockchain — VegaX Research Report

VegaX Holdings
4 min readAug 23, 2022


VeChain: Supply Chain Meets Blockchain — VegaX Research Report

The Supply chain industry is worth trillions in the 21st century. Almost everything consumers buy has gone through a supply chain. These supply chains are responsible for transforming raw materials into finished goods and eventually getting them into the hands of customers. Yet this system remains inefficient because a large chunk of the system remains hidden, and a product’s origin is mostly unidentified. Trading of counterfeit products is also a discrepancy in supply chains that costs big brands millions of dollars each year. Even after the all the advancements of humankind, most supply chain management systems still rely on paper records. This paper trail grows as the product reaches the hands of the customers.

Vechain Fixes this!

Vechain is a supply chain solution built on a blockchain known as the VechainThor Blockchain. Vechain was designed to improve the supply chain management system by streamlining the processes involved in complex supply chains with the help of Distributed Ledger Technology or DLT.

In short, it tracks and authenticates goods that travel around the world and consequently end up with customers.

Vechain was founded in 2015 by the former CIO of Louis Vuitton, Sunny Lu and is one of the first blockchains built solely to cater for the needs of enterprise-level clients. Some of the notable clients of Vechain are BMW, LVMH and Walmart. With the help of Vechain, consumers and retailers have the ability to determine the authenticity of a product. From sourcing raw materials for the product, all the way up to delivery, vechain records every single movement in the supply chain. This solves both the purposes discussed earlier — customers have the knowledge that their product is genuine and suppliers have the ability to fight counterfeit products.

Vechain is powered by two distinct tokens, namely VeChain Token (VET) and VeChainThor Energy (VTHO). VET is used for the transfer of value across the network and VTHO is used as a “gas” for smart contract transactions. Unlike Ethereum, which has the same token for both gas and medium of exchange, Vechain’s two token economy makes governance efficient and economic model predictable for dApps developers. VTHO makes sure that the Vechain does not suffer from extreme volatility like other currencies. This is the reason that one is used as a medium of exchange and the other is used for transaction gas. Vechain initially launched on the Ethereum blockchain and eventually transferred to its native VeChainThor blockchain.

The VET token has a total supply of 86 billion and works on a Proof-of-Stake consensus mechanism along with VeChain’s unique Proof-of-Authority variation. Unlike Proof of Stake where the decision-making relies on staking or who has more number of coins, Vechain’s Proof of Authority works in a way where the Vechain foundation chooses the nodes based on reputation as ‘authorities’ — which makes the ecosystem more centralised. And it makes perfect sense for an industry like Supply Chain to have a proportionate amount of centralisation because of the involvement of larger stakeholders such as manufacturers, shipping companies, and retailers.

VeChain nodes are obligated to stake at least 25 million VET in order to have skin in the game. There are 101 master nodes that are responsible to reach consensus on the blockchain, and KYC is mandatory to become one of the authority master nodes. Vechain’s White Paper also states that its system does not require a lot of energy and validators to reach consensus.

Another type of master node, called an economic master node, are used to check on power and are unable to produce blocks. This is done by allocating certain number of votes to each economic node with respect to their VET holdings. Each economic node gets 1 vote per 10,000 VET held. This system of master nodes makes voting rights centralised in a decentralised ecosystem.

The global supply chain has been managed by technology for years now:. RFID, QR codes, and NFC have helped supply chains by being connected to databases using IoT (internet of things). VeChain takes these systems to the next level by integrating IoT with blockchain technology. Vechain uses RFID tags or smart chips that monitor crucial data during shipment and broadcasts it in real time to the blockchain network making it accessible to any stakeholders. This makes the stakeholders able to monitor the goods and keep check of their quality and authenticity.

Vechain, since 2015, has many notable partners some of which apart from LVMH and BMW are PWC and the Chinese Government. In VeChain’s whitepaper, the team has mentioned plenty of use cases with respect to the pharma and food industry because in both of these industries it is very important to know about the supply chain. They also mention their plans of becoming a leader in dApps and ICO space.

Vechain provides a use case in the blockchain industry different from most of the projects currently being developed. The supply chain industry could drastically change in a positive way if these kind of projects gain mainstream adoption.

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